Cafe HayekCafe Hayek - where orders emerge - Article Feed

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Quotation of the Day

Posted: 20 Sep 2020 02:53 AM PDT
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(Don Boudreaux)




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is from page 259 of Matt Ridley’s important 2020 book, How Innovation
Works: And Why It Flourishes in Freedom:

Technology is absurdly predictable in retrospect, wholly unpredictable in
prospect.

DBx: This reality is yet another that is predictably ignored by proponents
of industrial policy as a means of improving the economic fortunes of the
bulk of ordinary people within a country. These proponents fail to
understand the importance of permissionless innovation of open-ended,
competitive trial-and-error of emergent order. They are economic
creationists, intellectually no more credible than are biological
creationists who deny the reality of evolution by natural selection.




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Bonus Quotation of the Day

Posted: 19 Sep 2020 07:54 AM PDT
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(Don Boudreaux)




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is from page 106 of the late Stanford University economic historian Nathan
Rosenberg’s insightful 1992 paper “Economic Experiments,” as this paper is
reprinted in Rosenberg’s 1994 book, Exploring the Black Box: Technology,
Economics, and History:

It is inherently difficult to experiment [economically] and to introduce
numerous small changes, and to do so frequently, in a large hierarchical
organizational structure where permissions and approvals are required from
a remote central authority.

DBx: Each proponent of industrial policy, whether from the political left
or right or middle, necessarily presumes that the government officials who
craft the industrial policy perform their crafting with god-like knowledge.
For any such plan to work that is, for any such plan to generate outputs
that when either consumed directly in the home country or traded for
imports improve the economic well-being of the people of the country as
much as possible the drafters of the plan must determine just what exactly
will be produced, in what quantities, and how these outputs will be
produced.

If the drafters of the plan do not have such knowledge, then after the plan
is launched errors will eventually be committed. Adjusting to the discovery
of these errors will require revision of the plan. Such revision will, in
turn, often require that the original plan be adjusted not just in the
location where the error is first discovered (Omigosh, the cost of using
carbon fiber to build airplane frames is higher than we thought!) but also
in other, more-distant parts of the plan (We need to shift some aluminum
over to our aircraft producers, so you producers of automobiles and washing
machines have to find some other materials to use.)

Industrial-policy proponents simply ignore this reality. They simply or,
rather, simple-mindedly assume that government officials either already
possess or will easily come to possess all the vast amounts of knowledge,
much of it subject to change, necessary to make the industrial policy a
success.

I understand that regular readers of this blog likely tire of my
repetitiveness, but I repeat a question that I will repeatedly ask until
someone offers to it a serious answer: Exactly how will those officials who
craft and monitor industrial policy obtain the knowledge they must possess
in order to make industrial policy work in the ways that industrial-policy
proponents promise it will work?




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